Swiss and US Export Controls also Cover the Transfer of Intangible Technology

SECO publishes guidance on "Export Controls: Dealing with intangible technology transfer"

The Swiss SECO has published a guidance document covering the topic of intangible technology transfer. Reason may be the increasing number of intangible exports subject to licensing due to digitalization of industry and emergence of new manufacturing methods such as 3D printing. All these developments raise new questions in the field of export controls, which SECO tries to clarify in their guidance document which will be summarized below.

Fundamental Principles

The fundamental principles of intangible technology transfer can be summarised as follows:

  • Not all data transmitted across borders are subject to licensing.
  • It is essential to check whether the data to be transmitted across the Swiss border can be assigned an export control number (ECCN) in annexes 2-5 of the Goods Control Ordinance (GCO).
  • If the controlled data is transferred to a server, the export control laws in the country in which the server is located will determine the licensing requirements. (Note that in certain jurisdictions, the geographic location of the data owner prevails over the server’s location and determines the applicable export control jurisdiction).
  • Access from abroad to data subject to licensing requirements in Switzerland already constitutes an export within the meaning of art. 3 para. 1 GCO.
  • The licensing procedure must be handled via the ELIC electronic licensing platform.

Procedure According to GCA and GCO

  • The first step is to identify a possible classification of the technology to be exported: Can the goods to be exported be assigned to an export control number of the annexes to the GCO?
    • If yes, a licence in accordance with Art. 3 para. 1 GCO is required.
    • If not, the transfer of corresponding intangible technologies is possible without a license.
  • The second step is to check whether the exporter knows or has reason to believe that corresponding intangible technologies are intended for the development, manufacture, use, transfer or deployment of NBC weapons (Art. 3 para. 4 GCO). The detection of “red flags”, such as indications of circumvention, or transaction in high risk industries or geographic locations should alert exporters of the need to increase due diligence measures, such as the use of an end use/end user certificate.
    • Finally, the destination countries and business parties must be screened to ensure that they are not covered by Swiss sanctions (SESAM).

Nature of Goods and Export

  • Goods subject to licensing may be exported in a tangible or intangible form:
    • Hardware
    • Data transfer via e.g. USB stick (data carriers), email or via cloud computing
    • transfer of knowledge by means of persons (secondment).
  • Export constitutes any cross-border activity. The GCA is subject to the principle of territoriality and therefore is also applicable to a transfer/download from Swiss servers to a foreign country.
  • Not considered to be exports:
    • business trips to foreign countries
    • cross-border commuters
    • Home office in the foreign territory, provided that technologies subject to GCO are not made accessible to third parties.
  • The data carriers must be secured (VPN access, encryption) and cannot be accessed by third parties abroad.
  • Printouts are permitted, provided that these are at all times under the control of the "exporter" and are not made available to third parties.

Implications for Swiss companies

The SECO guidance is an interpretation of the GCA/GCO that is in line with SECO's current practice for enquiries/approvals.

For many companies, the classification of intangible technology(s) and compliance with export control legislation in this area is (still) new territory. Often the export control know-how and processes are setup for to the export of physical dual-use goods, however, often the risks around the export of intangible controlled technologies does not get sufficient level of management attention.

Today, a robust ICP (Internal Compliance Program) must always include a technology control plan that ensures access protection as well as a controlled transfer of intangible technology.

With regards to Swiss companies, besides the relevance of the Swiss Goods Control Act (GCA), US re-export law must also be considered. An authorization may be required from US authorities for the re-export of controlled US technologies. Note that an US license may be required, not only for exports of goods and technology from Switzerland, but also for know-how transfer between individuals of different nationalities within Switzerland (“deemed export”).

MME Legal | Tax | Compliance will be happy to assist you with the develop, review or customization of an ICP, in which the exported intangible technologies and the relevant jurisdictions are taken into account appropriately and meaningfully after a risk analysis and a corresponding technology control plan has been drawn up.

The full guidance document from SECO can be accessed here. (PDF, 204 Kb)

August 2019 | Authors: Peter Henschel, Raphael Brunner, Andreas Furrer, Christine Gschwend

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